What do shoe leather costs refer to?
A) the cost of more frequent price changes induced by higher inflation
B) the distortion in resource allocation created by distortions in relative prices due to inflation
C) resources used to maintain lower money holdings when inflation is high
D) the distortion in incentives created by inflation by taxes that do not adjust for inflation

Question

Quizplus · Accepted Answer

Shoe leather costs refer to the resources used to maintain lower money holdings when inflation is high. This means people will have to frequently visit the bank or ATM to withdraw cash, which costs time and effort, like walking in uncomfortable shoes (hence the term "shoe leather").

What Do Shoe Leather Costs Refer To